ALTERNATIVE DISPUTE RESOLUTION METHODS

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ALTERNATIVE DISPUTE RESOLUTION METHODS

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ARBITRATION AND CONCILIATION Presentation
by D C Tanna, Advisor (Legal) Indian Merchants
Chamber IMC Marg, IMC Bldg, Churchgate, Mumbai
400 020 On August 24, 2004
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What is Arbitration?

• It is one of the Alternative Disputes Resolution
  Methods (ADR)
• Simply stated, Arbitration is the business
  worlds own way of finding a fair outcome of a
  business dispute
• It is unique as a method of dispute closure. It
  does not use the courts or methods of legal
  systems but unlike other alternatives to
  court, it is binding upon the parties and is
  final in disposing of the dispute.
• Oxford English Dictionary defines it as, The
  settlement of a matter at issue by one whom the
  parties agree to refer the claims in order to
  obtain and equitable decision.
• The key word in the definition is agree.
  Arbitration takes place only by an agreement. In
  most of the countries by law decisions of
  Arbitrator are enforced more or less in the same
  way as judgment of the court. In India under the
  Arbitration and Conciliation Act 1996 awards
  given by Arbitrators are enforced like court
  decrees but Arbitration process starts only if
  there is an agreement between the disputing the
  parties to refer the dispute to Arbitrator.

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How Is It Different From Justice Dispensation by
Courts?
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Why Arbitration

• 1. Former Chief Justice P N Bhagwati once
  observed, I am pained to observe that
  the judicial system in the country is almost
  on the verge of collapse. These are strong
  words I am using but it is with considerable
  anguish that, I say so. Our judicial systems
  is creaking under the weight of arrears.
• 2. It is estimated that there are about
  twenty million cases awaiting disposal in
  over eight thousand courts in the country.
  Average period taken for disposing of even
  criminal cases is not less than a decade. In
  civil cases the situation is even worse.
  It is not unusual that it takes at least two
  decades for a civil suit to get even listed
  for hearing.

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continued

• 3. Even after the formation of various Tribunals
  i.e. Central Administrative Tribunals, Motar
  Accidents Compensation Tribunals, Customs Excise
  and Gold Appellate Tribunal (CEGAT) and
  Industrial Tribunals etc. the dispensation of
  justice has not become speedy.
• 4. Time taken by the courts in disposing of
  cases, provisions of appeal, far-ranging and
  protracted and often confusing evidence and
  procedures, lack of confidentiality and prospect
  of inconsistent judicial outcome, and expenses
  involved in litigation all have contributed in
  making arbitration a preferred mechanism for
  solving commercial disputes especially in
  countries like India. It has four distinct
  factors to commend it speed, finality,
  cheapness and justice.
• 5. That is why all over the world the recent
  trend is to shift from litigation to Alternative
  Disputes Resolution (ADR) Methods which includes
  arbitration conciliation and mediation.

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Process of Arbitration

• Very Simple under the Rules of Arbitration of
  IMC.

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Rules of Arbitration and Rules of Conciliation of
IMC

• Based on the Arbitration and Conciliation Act,
  1996 which in turn is based on Model Law Rules
  recommended by the general Assembly of the United
  Nations.
• United Nations Commission on International Trade
  Law (UNCITRAL) was established by the general
  Assembly of United Nations in 1966 to remove or
  reduce the obstacles to the flow of international
  trade due to disparities in national laws
  governing international trade.
• The commission amongst other things adopted
  Arbitration Rules in 1975, Conciliation Rules in
  1980 and Model Law on International Commercial
  Arbitration in 1985.
• India has adopted UNCITRAL Model Law on
  International Commercial Arbitration and Rules of
  Conciliation and based on them enacted
  Arbitration and Conciliation Act, 1996 and based
  on the said Act Rules of Arbitration of IMC have
  been framed. Thus aspect of globalisation is
  taken care of by IMC.
• Now without going deep into historical aspects I
  will tell you about the process of Arbitration
  under Rules of Arbitration of IMC.

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Process of Arbitration

• Very Simple under the Rules of Arbitration of
  IMC.
• Submit to IMC a written request for arbitration
  and send a statement of claim along with all
  supporting documents relating to the claim.
• IMC will send the claimant and the defendant a
  copy of Rules of Arbitration along with a list of
  Arbitrators on its panel and ask both the parties
  to appoint by mutual consent an Arbitrator from
  amongst the Panel of Arbitrators of IMC.
• Simultaneously the defendant will be asked to
  submit his defence statement with all the
  supporting documents on which he wants to rely.
• If the parties fail to appoint Arbitrator or
  Arbitrators by mutual consent, IMC proceeds to
  appoint an Arbitrator or Arbitrators as the case
  may be depending upon terms of the contract
  between the parties or the amount of claim as the
  case may be.

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continued

• Fees payable towards Administration and
  Arbitrators are also collected in advance either
  fully or partially depending upon the
  circumstances.
• Before Arbitrator is appointed all preliminary
  work is completed by IMC. Hence once Arbitrator
  is appointed he straight away commences
  arbitration proceedings. Preliminary work like
  receiving statement of claim from Claimant,
  defence statement from defendant counter-claim
  if any reply to counter claim, documents on
  which parties want to rely, etc. is completed by
  IMC.
• Before commencing proceedings or even during
  proceedings Arbitrator also explores
  possibilities of settlement between the parties.
• If no settlement is reached then Depending upon
  amount of claim counter claim if any number of
  witness to be examined, cross-examination
  etc.attempt is made to finish proceedings within
  6 months from the date of appointment of the
  Arbitrator with the co-operation from both the
  disputing parties.
• The Award given by the Arbitrator is final and
  binding on the parties and can be enforced like a
  decree of the court.

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Fast Track Arbitration

• IMC rules also provide for Fast Track Arbitration
• The parties may opt it for expeditious disposal
  of case in a fixed time frame.
• The Arbitrator is authorised to decide the
  dispute on the written pleadings, documents and
  written submissions without any oral hearings.
• The Arbitrator can call for any further
  information and or clarification required.
• The oral hearing only if joint request is made
  by both the parties or if the Arbitrator
  considers it necessary in any particular case.

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What IMC does for Arbitration

• IMC provides infrastructure for institutional
  arbitration at a very reasonable cost.
• It provides facilities for fully airconditioned
  venues of different sizes to suit the different
  requirements of the parties.
• It provides secretarial assistance to the
  arbitrator for recording the proceedings and
  giving the award.
• It has an updated Rules of Arbitration which are
  based on the provisions of the Arbitration
  Conciliation Act, 1996 with such additions as are
  supplementary and are permissible.
• It has also got separate set of Rules for
  Conciliation.
• It has got Panel of Arbitrators consisting of
  eminent Retired Judges of Supreme Court and High
  Court, very eminent Solicitors and Advocates,
  other eminent Professional Chartered Accountants,
  Architects, Businessmen, Engineers and
  Industrialists having very high integrity and
  respect in the society.
• It also has the Panel of Conciliators consisting
  of expert conciliators and businessmen.
• A Number of Cases involving large amount have
  been disposed of by arbitration in a very short
  time.

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What Is Required to be Done To Take Advantage of
Facilities Offered

• The Parties should simply take care to ensure
  that an appropriate clause is inserted in all
  their Contracts, Purchase Orders etc., to the
  effect that any dispute or differences arising
  between the parties out of or relating to the
  Contract shall be referred to Arbitration in
  accordance with the Rules of Arbitration of the
  IMC.
• The Clause recommended by IMC to be inserted in
  all the Contracts is as follows
• Any dispute or difference whatsoever arising
  between the parties out of or relating to the
  contract or construction meaning, scope,
  implementation operation or effect of this
  contract or the breach thereof shall be referred
  to arbitration in accordance with the Rules of
  Arbitration of the Indian Merchants Chamber and
  the award made in pursuance thereof shall be
  final and binding on the parties.

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continued

• Any dispute or difference whatsoever arising
  between the parties out of or relating to this
  contract or construction, meaning, scope,
  implementation, operation or effect of this
  contract or the validity or the breach thereof,
  shall be referred to Conciliation for amicable
  settlement in accordance with the Rules of
  Conciliation of the Indian Merchants Chamber and
  if not satisfactorily resolved in conciliation
  shall be referred to Arbitration in accordance
  with the Rules of Arbitration of the Indian
  Merchants Chamber and the award made in
  pursuance thereof shall be final and binding on
  the parties.

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Annexure1
Arbitrators Fee (Revised on 1st November,
2002) The Arbitrators fee (for each arbitrator)
will be fixed separately with regard to the
amount in dispute in each case, as under and will
be shared equally by both the parties.
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continued

• In addition to the above
• Each arbitrator will be entitled to receive a
  special Fee for study of the pleadings, case
  material, writing of the award etc. with regard
  to the amount in dispute in each case as under
  -
• Upto Rs. 5,00,000 - Rs. 3,000/-
  lumpsum
• Rs. 5,00,001 to Rs. 10,00,000 - Rs.
  6,000/- lumpsum
• Rs. 10,00,001 to Rs. 100,00,000 - Rs.
  10,000/- lumpsum
• Over Rs. 100,00,001 and above - Rs.
  15,000/- lumpsum

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Annexure 2

• Administrative fee (Revised from 1st November,
  2002)
• The administrative fee will be will be fixed
  separately with regard to the amount in dispute
  in each, case as under and will be shared equally
  by both the parties.